Medicaid Waivers: A Matter of Flawed Flexibility?

States' proposals to alter program may do more harm than good

WASHINGTON -- If the GOP Congress can't pass a proposed Medicaid overhaul through an Affordable Care Act (ACA) repeal-and-replace bill, states have other options for implementing significant but temporary changes to the program, according to policy experts.

In fact, a handful of states, including Kentucky, Arizona, Arkansas, and Maine have already submitted waiver proposals, or are discussing such an option. These waivers (all 1,115 of them) allow states to significantly alter their Medicaid programs, by enacting changes through demonstrations outside of the scope of what is allowable by law.

But the experts at a briefing Tuesday hosted by the Alliance for Health Reform, and sponsored by The Jayne Koskinas Ted Giovanis Foundation for Health and Policy, disagreed as to whether states' proposed changes would help or hurt the future of the Medicaid program.

In March, Congress and the Trump administration delivered the American Health Care Act (AHCA), a bill that would have ultimately rolled back the Medicaid expansion -- the state option to increase eligibility for the program to residents up to 138% of the federal poverty level -- and dramatically cut funding for the overall program.

The debate over proposed changes to Medicaid seems to be about increasing state flexibility or the role of the program. In reality, it's about money -- "Who pays and how much?," said Trish Riley, executive director of the National Academy for State Health Policy.

Riley, a former Medicaid director in the 1980s, said that the per-capita cap allotment proposed under the AHCA -- a lump sum of payments to states based on the number of individuals in each of several eligibility categories in a reference year -- would cut 25% from program funding.

"The only kind of flexibility that would get you those kinds of savings is to remove people from eligibility, or profoundly restructure the program to be something quite different," she said.

Even if the program's finances were tied to growth of the medical Consumer Price Index (CPI), as has been proposed, Medicaid's costs have always exceeded that formula, Riley added.

She stressed that Medicaid's core problems were not philosophical but financial, noting that a majority of states had reported budget problems of late, and that the investment in the administration of the program -- outside of waste and abuse investigations -- is seriously lacking. The average tenure of a Medicaid program director is 19 months, she noted.

Riley also said that the federal discussion of Medicaid had a "chilling effect" on many of the states that were planning major reforms, with some exceptions, such as the Kansas legislature, which voted to expand it's Medicaid program right as the repeal efforts were underway in late March.

Imposing Limits

Joan Alker, executive director of the Center for Children and Families (CCF) and a research professor at the Georgetown University McCourt School of Public Policy here, argued that the view of block grants and waiver approaches increasing state flexibility is "flawed."

Because states already have discretion around how much to pay providers, the only two components of a Medicaid program left to alter are who it covers and what benefits it covers, she said.

Alker said that she anticipated that in the coming months, red states, particularly those whose legislatures opposed expansion from the start, will aim to limit the number of people covered by Medicaid or the services they receive, through explicit or implicit strategies, using waivers.

An explicit reform might include freezing of capping the Medicaid program; a more subtle way to limit enrollment might be to incorporate a work requirement.

Similarly, examples of strategies for limiting what states cover could include higher cost-sharing and premiums, Alker noted, pointing out that research has shown that adding premiums would inevitably reduce the number of people who get coverage.

"Simply because we limit people access to care does not mean their healthcare needs go away," she said. She called such strategies short-sighted because they can lead low-income individuals, including those with chronic conditions, to skip out on healthcare services. They may then land in the emergency department, which is one of the most expensive places to receive care.

Alker drew attention to Indiana's Medicaid expansion, which requires enrollees to pay premiums and includes lock-out periods for those who fail to pay on time. There is also Kentucky's proposed expansion waiver that includes lock-out periods, premiums, and work requirements, a provision rejected under the Obama administration.

The panel agreed that the decision on Kentucky's waiver, likely the first waiver decision of the Trump administration, would lay the blueprint for other red states to follow.

"Fundamentally, I don't think these programs meet their stated objectives," she said.

Arizona and Arkansas are in the process of preparing waiver submissions with similar requirements, according to a report from the Kaiser Family Foundation.

Be Realistic, Not Emotional

"Let's not make this a purely emotional argument," cautioned Josh Archambault, a senior fellow at the Foundation for Government Accountability, noting that states and legislatures who aim to reform Medicaid are often characterized as heartless.

It makes logical sense to try to "re-prioritize" the program for different populations, he noted. States have to meet a budget every 2 years, and every dollar that is put toward Medicaid expansion means one less dollar for other programs, such as housing and education.

Instead of asking how many more people can be put onto Medicaid, the question that needs to be asked is "Are we getting value?" he said.

In order to commit to giving the best possible care to those who truly need it, it may be necessary to rethink the population served, he stated, adding that asking which people should be served by the program -- "the deserving poor" versus "able-bodied" individuals -- isn't illogical. If an adult can be on private insurance instead of Medicaid, states and the government should encourage that shift, he said.

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